India's economy will sustain growth of over 7 per cent in the next financial year, an official report said Friday, as the government gears up to present its budget with clamour for promised reforms growing.

The Economic Survey, an annual report compiled by the finance ministry ahead of the budget on Monday, said gross domestic product (GDP) would expand between seven percent and 7.75 per cent in 2016-17.

The relatively upbeat prediction comes despite a weak global economy, with a slowdown in China that has worried investors and other major emerging markets in recession.

India's GDP likely grew 7.6 percent over the 2015-16 financial year, the government said, making it the world's fastest-growing major economy.

However, Friday's forecast represents a paring down of expectations from last year's survey which predicted growth would top eight percent this year and hit double digits in the medium term.

"Though the emerging market economies have clearly slowed down, the Indian economy stands out as a haven of macroeconomic stability, resilience and optimism," the finance ministry said in a statement.

India's services sector remains one of the main engines of growth, expanding more than nine percent in the current fiscal year, the Economic Survey said, despite a massive drive to boost manufacturing.

Prime Minister Narendra Modi has made it a priority to boost India's economic growth, vital for lifting millions out of poverty, since sweeping to power in a general election in May 2014.

CHALLENGES

But investors have raised concerns about the pace of promised reforms needed to create jobs for India's tens of millions of young people.

And while its growth has outpaced that of powerhouse China in recent quarters, Asia's third-largest economy still faces challenges.

After cooling from previously high levels, India's once exorbitant inflation has ticked up again over the past few months, with prices rising 5.7 percent in January.

India's main stocks index has lost a fifth of its value over the past year, private investment is weak and the rupee is trading at near-record lows against the dollar.

Investors will be looking to Monday's budget for concrete reforms from the business-friendly government.

There are hopes it will move to overhaul a complex corporate tax regime seen as off-putting to investors.

The Economic Survey also said the government probably succeeded in reducing its fiscal deficit to 3.9 percent of GDP in 2015-16 as economists expect.

It remains to be seen whether Finance Minister Arun Jaitley will look to relax the stringent fiscal deficit reduction target for next year when he presents the budget.

India has in recent years successfully managed to narrow its high fiscal deficit — the amount by which a government's spending exceeds its income.

But it still has high government debt compared with its developing country peers, with borrowings at 64 percent of GDP in 2015-16, according to ratings agency Moody's.

The country is also dogged by concerns over the reliability of its economic growth data, a year after the government introduced a revised formula for calculating GDP which some analysts have criticised.

The government says the new method is closer to international standards.